Child policy shift to create housing demand

Analysts say need for more space to meet baby boom unlikely to drive home prices up sharply

PUBLISHED : Monday, 25 November, 2013, 3:52am
UPDATED : Monday, 25 November, 2013, 3:52am

Kelvin Xie Puching was elated when he heard that his dream of having a second child was a step closer to reality, courtesy of the Communist Party's announcement that it would soon relax its long-standing one-child policy.

"Most of my friends and I are of the view that it is much better to have two children instead of just one in a family," said Xie, a senior associate director at DTZ's Shenzhen office. "If we grow old, for instance, it's best to have two children who can share the responsibility of taking care of us."

He now has an eight-year-old son and said he and his wife were keen to have another child.

In a communiqué issued on November 12, at the end of its third plenum, the party's Central Committee announced that couples would be allowed to have a second child if one partner was an only child.

The central government will increase housing supply … to meet growing demand

The move is apparently aimed at blunting the adverse economic and social impacts of an ageing population and shrinking workforce. The central government has left it up to provincial authorities to decide when to introduce the reform.

Xie's wife is an only child and they are just one of millions of couples expected to benefit from the easing of the three decades old one-child policy.

At the age of 40, Xie is now gearing up for a second child - looking to move into a bigger home and even buy a car to improve the family's mobility.

"We may need someone, like one of our parents, to live with us and take care of the baby in future," he said. "A three to four-bedroom apartment would be ideal for us."

The family of three now lives in an 80-square-metre flat and he plans to move into a 130 sq metre unit once the second child is born.

Xie bought his unit for 6,000 yuan a square metre 10 years ago, and home prices have since surged to 30,000 yuan a square metre.

Analysts forecast the policy change would create demand for housing but was unlikely give home prices a big boost.

Johnson Hu, a property analyst at CIMB, said the policy change would result in an extra 1.7 million newborn children a year, representing a 10 per cent rise on the number born last year.

"The first batch of new babies should come late next year or 2015, as the National Family Planning Commission said local governments would need to release implementation details," he said. "But it should not be long."

As the urbanisation rate on the mainland was about 50 per cent, Hu said that meant only half of the extra babies born each year - 850,000 - could boost housing demand in urban areas.

Based on the current average residential area of 30 sq metres per person, he said that would translate into 25.5 million square metres of housing demand, equivalent to 2.3 per cent of estimated residential sales this year.

The central government had signalled that it would continue to adjust its family-planning policies in order to achieve steady, long-term population growth. Hu said.

"This indicates that a full relaxation of the one-child policy into a two-child policy [with all families having the right to have two children] is possible in the mid-term," he said.

Alan Chiang Sheung-lai, the head of residential property at consultancy DTZ Greater China, said he expected to see greater housing demand in third and fourth-tier cities, with birth rates in first and second-tier cities remaining low because of higher living standards.

"The central government will increase housing supply in third or fourth-tier cities to meet growing demand but may tolerate price growth in first-tier cities as long as it is not a sharp rise," he said.

Frank Chen, the head of research at CBRE China, said the incremental population growth from the proposed policy change was likely to make the control of property prices more complex, but would not be a key driver of price increases.

"The rapid growth in property prices is driven by excessive liquidity, limited investment channels as well as imbalanced demand and supply, in particular in a number of major cities," he said.

Shanghai home prices rose 21.4 per cent year on year last month, the steepest increase among the 70 major cities tracked by the National Bureau of Statistics.

Beijing was next with an increase of 21.2 per cent, followed by Guangzhou with 20.7 per cent and Shenzhen 20.6 per cent.